Related Quotes

Company Profile

Coote confirmed on Tuesday it had completed documentation for a new debt facility with the Commonwealth Bank of Australia, which was first flagged on 5 March.

This extends its short-term funding capacity to 28 February 2011. The deal doesn’t do much for Coote’s leverage ratio, but it frees up management to focus on selling its South Spur Rail Business.

As the battle intensifies, it is worth considering Elph’s motives.

Elph is attempting to win control of Coote, in which it currently holds a 24.95 per cent stake because it is deeply dissatisfied with the way the company is run. Elph cites a substantial decline in the company’s share price from 39¢ in October to 18¢ in January as evidence that a new approach is urgently needed.

Elph’s real goal is to roll the board, which is not exactly stacked in its favour. It comprises managing director Michael Coote, plus an executive director non-executive director.

Elph is expected to call for a strategic review of Coote’s businesses. A controlling stake would allow it to make decisions without being blocked by managing director Michael Coote, who owns 16 per cent of the company.

Coote has offered Mr Elphinstone a seat on the board, but he has to date refused to take up the offer.

Elph is critical of Coote’s stalled recapitalisation plans. It plans to reduce its debt via an equity raising for its Greentrains business.

Coote is considering several options for Greentrains - a rolling stock leasing company that is not considered to be a good fit with the business. These include an off balance sheet financing deal, third party equity or a trade sale.

Among a laundry list of complaints detailed in its statement, Elph said that Coote had not provided shareholders with enough information on its proposed sale of its South Spur Rail business.

Despite the stand-off over how the company should be run, any animosity between Mr Elphinstone and Mr Coote has been confined to the boardroom and the relationship between the pair is said to be amicable.

Gresham Investment House is advising Coote, while RBS Morgans is advising Elph. Law firms engaged on the transaction are Cochrane Lishman Carson Luscombe for Coote and Baker and McKenzie for Elph.